In a Nutshell: More Than Just A Bottleneck Issue

November 2021

By Ken Herman

America’s supply chain didn’t suddenly fall into this disjointed state; plenty of global factors contributed to the shipping logjam.

The Port of Los Angeles, one of the busiest ports in the country, is starting to operate 24 hours a day, seven days a week to eventually ease major cargo bottlenecks that have led to shortages and higher consumer costs. While the neighboring Port of Long Beach also started doing a 24/7 schedule last month, major ports in Europe and Asia have operated around the clock for years. The latest change was announced by the
White House as it hopes to alleviate some supply-chain issues ahead of the holidays, though the increase in capacity will require much help from truckers as well as Walmart, FedEx and UPS.

What created this mess? The root of the problem goes back to the beginning of the pandemic in winter of 2020, when consumer demand slumped and shipping lines canceled cargo shipments between Asia and North America. When demand came back in the summer, thousands of empty containers were stuck in the U.S., and by the fall of 2020, the West Coast freight networks were again bursting at the seams to handle the surge in imports.

A wave of COVID-19 cases in Southern California over the winter exacerbated the issue by causing a labor crunch, with docks, warehouses and truckers that handled the cargo unable to find enough workers. Another previously undisclosed cause of this port problem may have been that China Shipping Co., Ltd., owns much of the LA port, and appeared to be less motivated to resolve America’s critical shortages or port bottlenecks.

Companies like Amazon, Target, Pottery Barn, Ulta Beauty and Gap were even offering discounts—or starting their holiday advertising—six weeks before Black Friday. The goal was to stretch out the year-end shopping season, as supply-chain challenges could leave them with empty shelves closer to the holidays. 

Retailers had goods that they brought in early, but with limited warehouse space available, they need consumers to buy the stuff ASAP. According to a RetailMeNot survey of almost 1,100 consumers, 37 percent of shoppers began their holiday shopping between August and September (if not earlier). Another 22 percent said they would start shopping in October, while 24 percent planned to begin in November ahead of Thanksgiving. Americans are expected to spend about $1.3 trillion this holiday season, per the latest forecast from Deloitte, marking a 7-9 percent increase over last year—if product availability allows that to happen.

No matter how bad our supply shortages are, they are much more acute in Europe, which is suffering from a bad bet on Green Energy. A big high-pressure system (and beautiful weather) neutered many of Europe’s wind turbines, which they now rely on for electricity, so natural gas prices have skyrocketed across the continent.

Complicating matters further, in Britain there are now lines at petrol stations, as many gasoline grades have been depleted due to a shortage of truck drivers due in turn to a lack of foreign workers post-Brexit. Prime Minister Boris Johnson has summoned the British military to deliver fuel
for as long as the truck-driver shortage persists. Due to a six-fold increase in natural gas prices in Britain, plus fuel shortages for vehicles, British citizens have suffered as Covid-19 created the worst recession there in 311 years.

It will be interest-ing to see where natural gas prices end up if we have a cold winter in both Europe and the U.S. While Germany is embracing natural gas as a clean fuel in its green movement, the problem, of course, is that it is hard to generate “green energy” in the dark winter months. The fact that Europe’s wind turbines froze last winter just exacerbates the green conundrum. 

The current energy crisis was also brought on by President Biden and the green lobby, which have failed miserably to manage the transition to renewables in an intelligent way. A year ago, the U.S. was energy independent, but recently President Biden was on the phone with OPEC begging them to increase production because of all the curbs being placed on the domestic oil and gas industry.  

No wonder CEOs of U.S. energy pro-ducers are bristling as crude oil prices continue to climb to seven-year highs.